Municipal Market Regulation

1. Municipal Market Regulation NFMA/MAGNYSymposiumMunicipal Fiscal Stress, Bankruptcy and Pensions April 1, 2011

2. Facts about the MSRB • Created by Congress in 1975 • Self-regulatory organization for municipal securities dealers and municipal advisors • no rulemaking authority over issuers or other market participants • The MSRB partners with SEC, FINRA and bank regulators on enforcement, examinations and surveillance • The MSRB coordinates with IRS, Treasury, SEC and other regulators, and Capitol Hill and other federal and state policymakers on market issues Municipal Securities Rulemaking Board

3. Facts about the MSRB • Congressionally mandated mission: • protect investors, municipal entities and the public interest • promote fair and efficient municipal bond market • MSRB furthers mission through • Rulemaking • Information services/systems • Outreach and Education • Market Leadership Municipal Securities Rulemaking Board

4. Increased Focus on the Municipal Market in Washington • Congress • Financial reform legislation; state and local government finances; unfunded pension/OPEB liabilities; state bankruptcy hearings • Obama Administration • Infrastructure Bank; ARRA • Treasury • Issue price/IRS audits • Build America Bonds/ARRA • Federal Reserve • Systemic risk • Securities and Exchange Commission • Priority of Chairman Mary Schapiro; Field Hearings; SEC Municipal Securities and Public Pensions Enforcement Unit Municipal Securities Rulemaking Board

5. The Dodd-Frank Wall Street Reform and Consumer Protection Act • Most significant legislative focus on municipal market issues since 1986 • Signed into law by President Obama on July 21, 2010 • Expands MSRB mission to protect municipal entities and obligated persons, in addition to investors and the public interest • Expands MSRB’s jurisdiction to regulate municipal advisors, in addition to dealers of municipal securities Municipal Securities Rulemaking Board

6. Protection of Municipal Entities and Obligated Persons • Dodd-Frank Act greatly expanded MSRB’s mission from solely protecting investors to also protecting: • Municipal entities, including state and local government issuers and pension plans; and • Obligated persons, such as universities and hospitals, whose credit stands behind municipal bonds Municipal Securities Rulemaking Board

7. Overview of MSRB Municipal Advisor Regulation • Municipal advisor registration • Municipal advisors— including dealer advisors—are required to register with the MSRB • Fiduciary Duty • Municipal advisors have a federal fiduciary duty • MSRB has requested comment on draft MSRB Rule G-36 and interpretation addressing conflicts of interest, conflict waivers and unmanageable conflicts • Fair dealing • MSRB Rule G-17, as amended, requires municipal advisors to deal fairly with all persons and prohibits them from engaging in any deceptive, dishonest or unfair practice • MSRB is requesting comment on a draft interpretive notice on the application of the MSRB Rule G-17 to municipal advisors Municipal Securities Rulemaking Board

8. Overview of MSRB Municipal Advisor Regulation • SEC restrictions • MSRB amended Rule G-5 to prohibit municipal advisors from engaging in municipal advisory activities in contravention of restrictions imposed by the SEC • Conflicts of Interest • Pay to play • MSRB requested comment on draft pay to play rule for municipal advisors • Gifts and Gratuities • MSRB is requesting comment on amendments to MSRB Rule G-20 that would limit municipal advisor gifts to employees controlling the award of municipal advisory business Municipal Securities Rulemaking Board

9. Recent MSRB Dealer Regulation • The MSRB continues to focus on dealer regulation in addition to fulfilling its new Dodd-Frank Act mandate • Recent MSRB dealer rulemaking initiatives include: • Retail sales practices • Underwriting activities • Political contributions • Trade pricing • Broker’s Brokers • EMMA/SHORT reporting Municipal Securities Rulemaking Board

10. Electronic Municipal Market Access (EMMA) • EMMA, at www.emma.msrb.org, is a centralized collection of municipal disclosure documents and trade data that provides public access to the information free of charge Municipal Securities Rulemaking Board

11. EMMA Information • Information Available on EMMA: • Official Statements – current & historical from 1990 • Advance Refunding Documents – current & historical from 1990 • Trade Data – real-time & historical from 2005 • Continuing Disclosure Documents – from 2009 • Market Statistics • Variable Rate Security Interest Rates – for ARS and VRDOs • Educational Resources Municipal Securities Rulemaking Board

12. EMMA/SHORT Reporting – New Rules • Amendments to EMMA and MSRB Rule G-32 • Underwriters are now required to provide information about an issuers’ continuing disclosure obligations • Effective February 14, 2011 • Expanded SHORT data collection • Additional data elements and key documents for auction rate securities and variable rate demand obligations required • Effective on or prior to May 20, 2011 Municipal Securities Rulemaking Board

13. Questions? Questions? Municipal Securities Rulemaking Board

14. Municipal Market Regulation NFMA/MAGNYSymposiumMunicipal Fiscal Stress, Bankruptcy and Pensions April 1, 2011